According to data released by the US Commerce Department on Wednesday, the US trade deficit increased 9.5 percent to $50.1 billion in July, widening for a second straight month and surging to a five-month high since the trade war started.
Ironically, the US trade deficit with China swelled 10 percent to a record $36.8 billion, a head-on blow to the US policies in the trade war.
The shortfall is a result of the country's economic structure and a strong dollar. As the US economy turns for the better and the dollar strengthens, imports are inevitably expanded. That the White House raises tariffs will only add costs to US imports without curbing consumers' demands for imported goods.
When the import and export data for July was released, it was just one day before the end of tariff hearings on the $200 billion worth of Chinese imports. The White House threatened to implement the proposed tariffs right away, but most of the tariffs target daily consumer goods of Americans.
The trade war against China launched by an aggressive US will not go as smoothly as the White House had expected. The July data proved once again that trade between China and the US benefits both, even trade in which the US has a deficit with China. If Washington wants China to suffer, it will feel the pain as well.
The US government sounds heroic announcing to the American people that it is going to put an end to China earning $500 billion every year from the US. However, this is nonsense that goes against the logical functioning of the world economy in a globalized era. In the beginning, the White House did not realize this, and now it finds itself in an embarrassing position.
If Washington insists on the extreme path of a trade war, it will encounter great opposition. Besides frontal opponents like China, the internal structure of the US economy will also reject it.
Both the Chinese and US economies are tied to the global value chain. Such a structure can't be easily changed by a trade war unless the US makes the rash decision to break the global value chain.
Trade stems from the public. The government can only play a guiding role rather than imposing peremptory norms. Now with planned-economy directives, Washington is trying to stipulate the market factors in China-US trade.
If the US economy continues to expand, its trade deficit is likely to increase. Only when the economy experiences a downturn, with a weakening dollar and a drop in domestic demand, can the trade deficit narrow. But at that time, the White House will likely have lost most of its courage for the trade war. This trade war will not go anywhere. It is little more than a propaganda tool in the US midterm elections.
US trade data shows that the trade war is exhausting the US. With the looming imposition of tariffs on $200 billion of Chinese goods, the negative economic impact will worsen. But the decline in trade will affect both China and the US. It is not only China that will bear the consequences.